Chapter 21? Flashcards
three legal organizations of firms
proprietorship, partnership, corporation
a business organization that employs resources to produce goods or services for profit
firm
a business owned by one individual who makes business decisions, receives all profits, and is responsible for all debts and legalities
proprietorship
owner of the firm (sole proprietorship) is personally responsible for all of the firm’s debts
unlimited liability
a business and managed by two or more co owners, or partners, who share responsibility and profits and are individually liable
partnership
a legal entity that may conduct business in its own name just as an individual does
corporation
legal concept whereby the responsibility or liability of the owners of a corporation is limited to the value of the shares in the firm that they own
limited liability
portion of corporation’s profits are paid to its owners and shareholders
dividends
total revenue minus total explicit costs
accounting profit
expenses that business managers must take account of because they must be paid
explicit costs
wages taxes and rent are all blank
explicit costs
expenses that managers do not have to pay out of pocket and hence do not normally explicitly calculate
implicit costs
amount that must be paid to an investor to induce investment in a business
normal rate of return
total revenues minus total opportunity costs of all inputs used
economic profits
price paid from debtors to creditors for the use of loanable funds
interest
